Document Type

Report

Publication Date

8-2023

Abstract

Offshore oil and gas infrastructure faces an existential threat: the increasingly pressing need to address the climate emergency. The Intergovernmental Panel on Climate Change projects that GHG emissions from existing and planned fossil fuel infrastructure will push global warming past the Paris Agreement’s 1.5°C threshold, and more detailed projections estimate that “nearly 60 per cent of oil and fossil methane gas ... must remain unextracted to keep within a 1.5 °C carbon budget.” The growing urgency of climate action, coupled with the increasing adoption of renewable energy systems and energy-efficient technologies, may strand thousands of offshore oil and gas installations across the globe.

This creates a risk for the public, because governments often sit as the “decommissioner of last resort." Most countries with significant offshore oil and gas resources have laws, regulations, and contracts that require private offshore oil companies to bear the cost of decommissioning their facilities. However, the legal and economic tools that states use to ensure that oil companies pay decommissioning expenses were often adopted without much, if any, consideration to climate change or the energy transition. As a result, a rapid phase-out of offshore oil and gas could cause a series of defaults and create immense financial burdens for governments of oil- and gas-producing jurisdictions.

This paper provides an overview of the statutory, regulatory, and contractual regimes governing offshore oil and gas decommissioning in ten countries, and identifies key financial and environmental risks that might arise in a “rapid phase-out” scenario presented by the energy transition. In doing so, it highlights areas in which these regimes may create risks in a rapid phase-out scenario involving the widespread cessation of offshore oil and gas activities. The first part of this paper provides a high-level overview of the legal and economic structures that govern offshore oil and gas decommissioning, highlights gaps and risks that are presented by a rapid phase-out scenario, and presents recommendations for policymakers, academics, and industry participants to reform decommissioning laws in the face of the climate-driven energy transition. The second part, Appendices 1 through 10, provides overviews of the laws, regulations, and contracts governing decommissioning in ten major oil- and gas-producing jurisdictions: Angola, Australia, Brazil, Indonesia, Malaysia, Mexico, Nigeria, Norway, the United Kingdom, and the United States.

Disciplines

Construction Law | Environmental Law | Law | Oil, Gas, and Mineral Law

Center/Program

Columbia Center on Sustainable Investment

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